Thread: I really don't know

Originally Posted by OHNOWhatnow

we agreed on a price and now the seller tells me if I give him $75,000 cash he'll take $30,000 off the price minus the 75,000 cash I gave him Now he is doing this for Capital gains why is he doing this and is this going to effect me now or in the future when it is my tun to sell. I just don't get it

Ok, what he is trying to get you to do is very illegal. If you use the home as a rental then you are allowed to depreciate the property. What this means is that the government allows you to play as though the home will be worth 0 after a certain number of years therefore you get a tax break each year while you own the home during that period. Now if you sell the home for a profit then you must pay capital gains (re-capture tax) on the the amount of money you wrote off through the depreciation tax credit.

Now if you are a home owner there is a certain dollar amount that you are allowed to make on the home without paying capital gains tax if you exceed this amount then it can be a substantial sum of money.

Either of these scenarios give the seller a chance to save on capital gains taxes if he is allowed to show a lower sales price. The trouble with agreeing to this is that you may be able to be named as a accomplice to tax evasion. I am not an attorney so therefore I can not answer this for sure. Before you dive in and make this deal I would consult an attorney. As it is not worth dealing with the IRS if you are able to be named an accomplice.

AGAIN GO AND MEET WITH AN ATTORNEY BEFORE YOU AGREE TO MAKE THIS DEAL!

This sounds like a shady deal and I would stay away from it. This could also affect you when you go to sell the property.